Preparing for Job Loss

By Erin Baehr, CFP®, EA
Shawnee-on-Delaware, PA
http://www.baehrfinancial.com/

“It’s a recession when your neighbor loses his job; it’s a depression when you lose yours.”
- Harry S. Truman

I don’t know if you are facing a recession or depression by Truman’s definition today, but chances are you are facing one or the other. Truth is, the only economic certainty we have is that there will always be economic uncertainty, so we need to be prepared for whatever comes our way. Specifically, what are some ways we can prepare for a possible job loss, and what should we do if it unfortunately does happen?

First, some general preparations we all should take, no matter how secure our job seems: Ideally, we should have 10% of our annual income in a safe emergency account we can access immediately, and another 20% of our annual income in additional reserve, again in a safe account, but perhaps in certificates of deposit or money market accounts. That amount may seem insurmountable, but don’t let that discourage you. Start small and be faithful. In a world where things seem so out of our control, working on a goal like this can go a long way toward the peace of mind that comes from doing something to improve the situation.

Work hard to reduce consumer debt, and pay it down so your monthly obligations are more manageable. Track your spending so you know where you stand; take a good look to see if you can easily cut some things out of the budget now and stash the cash you save. Note where you could cut deeper if need be. Open a home equity or other line of credit now, while you are employed, to have that available if you do lose your job.